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There's some of that for sure, but real estate is a good inflation hedge. So if you print like we have been and new supply doesn't jack up, then here we are. T

There's some of that for sure, but real estate is a good inflation hedge. So if you print like we have been and new supply doesn't jack up, then here we are. That's just a natural economic thing; not a political system at play, other than a byproduct of massive printing which has been out of control for some time. I mean, we had interest rates jack up (for the US in modern times at least lol) and prices didn't drop as much as they should (and many that lost in bidding wars in the frothy market went to the sidelines) When the Fed goes the other way because they have no real choice, prices are going even higher.

briantakita 3y ago
Real estate prices is propped up with credit. Credit can be created at ever increasing numbers until there is a collapse in the credit markets or the monetary system. When loans become unpayable, defaults occur. If credit markets collapse, then housing prices go down. Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals).
- exclusiv 3y ago
  > Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals). Yes for commercial - usually cap rate based which is related to return and risk, replacement cost valuation, or revenue multiplier. With regard to residential - prices are going to go up when fed goes the other way. They have NOT been propped up with credit or favorable interest rates. Those factors have gotten worse but prices have held strong. They have been propped up because supply is still low and new construction is expensive. Those things aren't likely to change anytime soon. Not to mention US RE is still a good place to park foreign cash in relative terms and is a good inflation hedge. Rents will go up. Home prices will go up. Commercial hasn't fallen out yet though. Office space should be converted to multi family residential or mixed use. Commercial collapse is likely though which I think you are referring to. But to the article at hand - could be a way to monetize a sharp drop in revenue due to WFH and the hike in interest rates - convert to affordable housing and offset any investment to cities (ie taxpayers) to address the homeless and affordability crisis.
  - seanmcdirmid 3y ago
    > They have NOT been propped up with credit or favorable interest rates. We really can't tell yet. Since interest rates have gone up, lots of people don't want to move (to upgrade or downgrade) because you can't just transfer your current loan to another house. That has led to very tight inventory problems, which makes the market even crazier.
    - exclusiv 3y ago
      We can tell that despite less favorable lending, there are still multiple bids on homes in many top markets. If the lock in is a large factor, then inventory will shoot up as rates come back down. But then so will home prices as monthly payments come down and those dejected from losing bids before re-enter the market. Is the market going to be flooded with new housing? No. Is the market going to be flooded with people downgrading and moving into rentals? Prob not. For every old couple downgrading there's a younger couple needing to upgrade for more space due to WFH and/or kids or a first time homebuyer ready on the wing. Or an investment group ready to buy and rent. So basically - if rates go higher - many people are further locked in. Enjoy the favorable loan and inflation protection in RE. Inventory stays low. If rates go lower - more buyers. Maybe some upgrade/downgrade inventory. But there will be no magical new housing starts. Construction costs (labor/materials) unlikely to drop meaningfully. Home prices remain stable in most places and going up with inflation and time. And when the Fed reverses course - prices will jump. I don't see how prices drop as some might hope (first time homebuyers) in the near future.
      - seanmcdirmid 3y ago
        > We can tell that despite less favorable lending, there are still multiple bids on homes in many top markets. But supply and sales are still down, because inventory is really tight. Less supply can affect prices just like less demand can. > Is the market going to be flooded with people downgrading and moving into rentals? Prob not. For every old couple downgrading there's a younger couple needing to upgrade for more space due to WFH and/or kids or a first time homebuyer ready on the wing. But that's just it. Those old people aren't downgrading because it doesn't make sense for them to downgrade. They would only be paying more for less, so why bother? That younger couple that needs to upgrade for more space is even more screwed in this kind of market. > But there will be no magical new housing starts. Construction costs (labor/materials) unlikely to drop meaningfully. Yes, but that isn't really the point right now. There are still plenty of ongoing projects in my neighborhood that were started before rates shot up. That is significant amounts of new supply, but it is balanced by much fewer second hand homes on the market. > And when the Fed reverses course - prices will jump. The economy is whacked by inflation right now, you better believe that the Fed has gotten religion in considering housing costs as part of their inflation measure. So...as long as housing costs keep rising, interest rates are going to stay high anyways. Given how many people are now asset heavy, with speculation and everything, don't count out some kind of political solution to get out of the hole. > I don't see how prices drop as some might hope (first time homebuyers) in the near future. I agree, but that doesn't mean the market is stable.

briantakita 3y ago

Real estate prices is propped up with credit. Credit can be created at ever increasing numbers until there is a collapse in the credit markets or the monetary system. When loans become unpayable, defaults occur. If credit markets collapse, then housing prices go down. Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals).

exclusiv 3y ago
> Real estate has value & a premium associated with the credit markets & revenue generated by the property (e.g. rentals). Yes for commercial - usually cap rate based which is related to return and risk, replacement cost valuation, or revenue multiplier. With regard to residential - prices are going to go up when fed goes the other way. They have NOT been propped up with credit or favorable interest rates. Those factors have gotten worse but prices have held strong. They have been propped up because supply is still low and new construction is expensive. Those things aren't likely to change anytime soon. Not to mention US RE is still a good place to park foreign cash in relative terms and is a good inflation hedge. Rents will go up. Home prices will go up. Commercial hasn't fallen out yet though. Office space should be converted to multi family residential or mixed use. Commercial collapse is likely though which I think you are referring to. But to the article at hand - could be a way to monetize a sharp drop in revenue due to WFH and the hike in interest rates - convert to affordable housing and offset any investment to cities (ie taxpayers) to address the homeless and affordability crisis.
- seanmcdirmid 3y ago
  > They have NOT been propped up with credit or favorable interest rates. We really can't tell yet. Since interest rates have gone up, lots of people don't want to move (to upgrade or downgrade) because you can't just transfer your current loan to another house. That has led to very tight inventory problems, which makes the market even crazier.
  - exclusiv 3y ago
    We can tell that despite less favorable lending, there are still multiple bids on homes in many top markets. If the lock in is a large factor, then inventory will shoot up as rates come back down. But then so will home prices as monthly payments come down and those dejected from losing bids before re-enter the market. Is the market going to be flooded with new housing? No. Is the market going to be flooded with people downgrading and moving into rentals? Prob not. For every old couple downgrading there's a younger couple needing to upgrade for more space due to WFH and/or kids or a first time homebuyer ready on the wing. Or an investment group ready to buy and rent. So basically - if rates go higher - many people are further locked in. Enjoy the favorable loan and inflation protection in RE. Inventory stays low. If rates go lower - more buyers. Maybe some upgrade/downgrade inventory. But there will be no magical new housing starts. Construction costs (labor/materials) unlikely to drop meaningfully. Home prices remain stable in most places and going up with inflation and time. And when the Fed reverses course - prices will jump. I don't see how prices drop as some might hope (first time homebuyers) in the near future.
    - seanmcdirmid 3y ago
      > We can tell that despite less favorable lending, there are still multiple bids on homes in many top markets. But supply and sales are still down, because inventory is really tight. Less supply can affect prices just like less demand can. > Is the market going to be flooded with people downgrading and moving into rentals? Prob not. For every old couple downgrading there's a younger couple needing to upgrade for more space due to WFH and/or kids or a first time homebuyer ready on the wing. But that's just it. Those old people aren't downgrading because it doesn't make sense for them to downgrade. They would only be paying more for less, so why bother? That younger couple that needs to upgrade for more space is even more screwed in this kind of market. > But there will be no magical new housing starts. Construction costs (labor/materials) unlikely to drop meaningfully. Yes, but that isn't really the point right now. There are still plenty of ongoing projects in my neighborhood that were started before rates shot up. That is significant amounts of new supply, but it is balanced by much fewer second hand homes on the market. > And when the Fed reverses course - prices will jump. The economy is whacked by inflation right now, you better believe that the Fed has gotten religion in considering housing costs as part of their inflation measure. So...as long as housing costs keep rising, interest rates are going to stay high anyways. Given how many people are now asset heavy, with speculation and everything, don't count out some kind of political solution to get out of the hole. > I don't see how prices drop as some might hope (first time homebuyers) in the near future. I agree, but that doesn't mean the market is stable.